The high level of dollarisation of large and medium-sized extractive enterprises continue to exert pressure on the soundness of their balance sheets. After the third quarter of 2015 when foreign currency liabilities sharply grew to 54% of total liabilities from 34% in the previous quarter, the figure started falling between October 2015 and March 2016. It first fell to 46^ then to 41% in the first quarter of 2016 – but this level still remains quite high.

The situation remains complicated in terms of large extractive companies’ foreign currency positions in an analysis of ensuring risks relating to servicing such liabilities. Large and medium-sized extractive enterprises’ combined foreign currency assets totalled KZT2.6tn in the first quarter of 2016 against foreign currency liabilities worth KZT2.9tn. That liabilities exceed assets is recorded for the second quarter in a row and this is a quite unusual situation.

Only 17% of assets in the sector is denominated in foreign currency and this shows major extractive companies’ positions that they don’t expect a sharp growth in the value of foreign currency liabilities due to a deep depreciation of the national currency.

That large and medium-sized mining companies reduced their devaluation expectations is proved by the structure of their foreign currency assets and liabilities.

In the short-term period risks of unexpected changes in the exchange rate are insured fully. At the end of the first quarter of 2016, the amount of foreign currency short-term liabilities of enterprises to creditors and suppliers were estimated at KZT1tn, whereas foreign currency assets were two times bigger – KZT2tn.

Large extractive enterprises did not start increasing their short-term foreign currency assets: the value of short-term foreign currency liabilities started growing in the second quarter of 2015 and foreign currency liabilities only in the third quarter of 2015.

The long-term balance sheet shows a different structure of foreign currency position. The value of foreign currency long-term assets of large and medium-sized mining companies peaked at the end of 2014 – KZT1.9tn. And suddenly this started falling – by the second quarter of 2015 when the Kazakh population increased their devaluation expectations the amount of long-term assets in foreign currency stood at only KZT607bn, falling by 66% in six months.

During the following six months of 2015 and the first three months of 2016 the volume of these assets did not practically change.

The value of foreign currency long-term liabilities in the sector, on the contrary, started growing sharply in the second half of 2015. Between July and December 2015 it grew by 130% from KZT921bn to KZT2.1tn.

At the moment (the first quarter of 2016) long-term foreign currency liabilities of large mining companies exceed foreign currency long-term liabilities by KZT1.3tn.

Changes in foreign currency positions of large mining companies are accompanied by a change in priorities of enterprises in terms of currency. Traditionally, large and medium-sized mining enterprises hedged their foreign currency risks by buying as much as US dollars as possible and this tactic was seen until July 2025.

In the second half of 2015 demand for cash US dollars by large mining companies fell and, as a result, net foreign currency position on the dollar was minus KZT258bn at the end of the first quarter of 2016.

Noteworthy, large and medium-sized mining companies sharply increased buying Russian rubles. De factor, growth in demand for the Russian currency by mining companies started at the end of 2013 but it sharp increase in purchases of the Russian currency was noticed at the end of 2015 which is continuing this year.